Middle Class Squeeze - Large Scale Economic Issues Associated With The Middle Class Squeeze

Large Scale Economic Issues Associated With The Middle Class Squeeze

• One of the major economic changes that is often associated with the middle-class squeeze is the change from a budget surplus to a budget deficit that has occurred in the 2000s. In 2000, there was a surplus of over 200 billion dollars, which became a 300 billion dollar deficit in 2005. This deterioration of the overall economic condition is believed to have led to many of the situations associated with the current economic squeeze.
• Increases in the unemployment rate - During the first three years of the new millennium, the unemployment rate increased by almost 50% and still remains higher today than it was in January 2001.
• There has also been a slowing of job creation in the U.S. with the economy losing 1.5 million workers during the first four years of the new millennium. While middle income jobs become fewer, those earning the middle income wage can purchase less with those dollars now than they once could.
• The inflation rate was also the highest it has been in 15 years in 2005; thus wages haven't been able to keep up with inflation, causing a squeeze on middle-class consumption.
• The American middle class is still feeling these effects today, in 2011. With the current recession, it is becoming more and more difficult for middle-class Americans to keep their jobs. *The higher minimum wage today has encouraged workers to enter the labor market, which has unfortunately created unemployment. The real minimum wage is not what the government sets is as. The longer the minimum wage is not raised, the lower it actually is. The government imposed wage does not take inflation or productivity growth into account.
• Another issue with the current minimum wage revolves around compliance. Currently, compliance regulations and rules over the minimum wage are weak. Typically, if a firm does not comply with the minimum wage, a settlement is made between the firm and the affected worker. In 2006, 2.2% of American workers received the minimum wage of $5.15 or less. Of these workers, about 75.8% were paid less than the actual minimum wage. This causes some workers to find it not worthwhile to pursue minimum wage jobs because they are not only competitive with the increased workforce, but if they are not actually paid the proper wage, there is only so much they can do.
• Another issue is that middle-class areas are shrinking as the income gap grows. There are increasingly issues with the rising income inequality in America. In 2007, it was determined that only 44% of American families live in middle-income neighborhoods which was down from 65% in 1970. This goes along with one of the main things that has shown the income inequality in the United States. The working class has now begun to be tied to the label working poor. From the “Occupy Wall Street” protests it is apparent that people across the country are becoming increasingly aware and upset with the income inequality in the country. The main argument is that the top 1% of the income bracket in the United States should pay a higher percentage of taxes. In general, the middle class is significantly decreasing. More and more middle-class American families are falling into the lower class. Another issue tied to this is the future. If middle income children’s families are becoming poor, they are less likely to get a good education, health care, and the same opportunities as wealthier families’ children. It is evident that not only have average Americans been greatly affected by the recession, but that our country’s future very well may being affected as well.